Why You Need a Prenup, Even if You Are Not Wealthy

A common misconception includes the concept that only wealthy couples need a prenuptial agreement. It is not only possible for a young woman who anticipates inheriting a massive sum of money to benefit from a prenup, an eager entrepreneur with only a hundred dollars and loads of debt to his name has the potential to benefit as well.

Without a contract present that outlines what happens to each of these individual’s assets, a divorce could lead to many problems. Rather than allowing the courts to decide, a prenup allows each spouse to agree upon what happens to their assets if a divorce were to send them separate ways.

What does a prenuptial agreement protect?

A prenuptial agreement is entered prior to marriage. Potential spouses decide how to handle their debt, assets and any other financial issues in event that their union were to legally dissolve. Once the couple formally marries, the prenuptial agreement automatically goes into effect.

Examples of what a prenup covers may include whether or not one spouse pays alimony to the other after a divorce, as well as the payment amounts and duration. Ownership of property after divorce is also addressed. These agreements also cover any matters that are legally contracted by individuals.

How is a business covered in a prenup?

The transfer, sale and overall management of property is covered in prenuptial agreements. Without a prenup in place, a court will ultimately determine how ones’ business and assets are divided upon a divorce.

During a divorce, the judge may award the entrepreneur’s spouse significant assets from the profitable business. If the divorcing spouses cannot agree on the value of the business, they will each hire valuation experts. In court, the scuffle will ensue, leading to stress and mounting legal fees.

A prenup is a cautionary step intended to protect one’s business assets in the unanticipated event of divorce. The entrepreneur who entered the marriage with challenging financial debt is unlikely to know if the business will succeed. Whether it does or not, a prenup guarantees protection.

Entering into a prenuptial agreement is a sensible choice if the entrepreneur aims to retain what is rightfully owned upon dissolution of the marriage. An unpredictable scenario like this proves that the wealthy are not the only ones who benefit from entering into a prenuptial agreement.

How are debt obligations handled in a prenup?

Premarital debt is often considered separate debt; however, as the marriage enters into latter years, debt can eventually become consolidated; or refinancing can blur the lines of responsibility. Upon a divorce, a prenup identifies which spouse is singularly obligated to repay the debt.

Intermingling debt, like housing debt, into student loan debt during a marriage can make both spouses responsible for repayment. Prior to entering a legal union, debt-free individuals who clearly outline via a prenup who is obligated to certain debts preserve their financial integrity.

Couples without high financial stakes also accrue debt; thus, making a prenuptial agreement especially important if a divorce were to occur. Potential spouses with an ability to take out a loan should strongly consider a prenup.

How are inheritances protected in a prenup?

A major inheritance can be a financial game changer. Protecting those types of assets with a prenup is a smart move. While inherited assets are not typically considered marital assets, they can become intermingled during the course of a marriage, just like debt.

An individual who inherits a substantial monetary sum might purchase a home. If both spouses reside in the home, the property may be considered a marital asset. Without a prenuptial agreement, the marital assets can be divided in a divorce. But a prenup protects the inheritance from a divorcing spouse.

The benefit of a prenup is that the agreement may be drafted to clearly explain ownership of assets, whether they be an inheritance, trust fund or other form of family money. A correctly drawn-up prenup will keep the inheritance separate from marital property.

Is the prenup binding?

A prenuptial agreement is not set in stone. Spouses may amend their prenup any time after marriage. Similar to entering the prenup, amendments must be presented in writing and signed by both parties. Married couples may also revoke the prenup by submitting the cancellation in writing.

Under Illinois divorce law, most prenups are enforced by the courts. Circumstances where the judge will not enforce the prenup include when one spouse was under duress and failed to sign the agreement voluntarily or the terms of the prenup are unconscionable (severely unfair or unjust).

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